NZ dollar declines as greenback seen attractive on signs of weaker European growth

File photo / NZ Herald

The New Zealand dollar declined as signs of weaker European economies turned investor attention to a revival in the US, increasing demand for the greenback.

The kiwi slipped to 78.33 US cents at 8am in Wellington, from 78.98 cents at 5pm yesterday. The trade-weighted index declined to 76.35 from 76.68 yesterday.

The dollar index, which measures the greenback against a basket of currencies, jumped overnight following a positive start to the US quarterly earnings season with companies such as Citigroup, JP Morgan and Johnson & Johnson beating expectations.

Meanwhile, European economic news continued to disappoint, with the German government downgrading its forecast for economic growth in the euro-zone's largest economy. The key ZEW survey of German investor sentiment slipped below the zero mark for the first time in three years, euro-zone industrial production declined and UK inflation data printed weaker than expected.

"There was a positive start to reporting season in the US," said Stuart Ive, senior dealer, foreign exchange, at OMF. "The market at the moment is very much caught between a relatively robust US economy, the confusion surrounding what the US is going to do with their interest rates, and then the whole global growth story as well. There was a big rebound in the US dollar overnight, especially against the euro."

Today, traders will be eyeing Chinese inflation and producer prices data. Tonight, the focus will be on US retail sales for September, ahead of the GlobalDairyTrade auction tomorrow morning.

The New Zealand dollar slipped to 61.93 euro cents from 62.08 cents yesterday. Germany's government said it now expects the euro-zone's 'engine' economy to expand 1.2 percent this year and 1.3 percent in 2015, down from April estimates for 1.8 percent and 2.0 percent respectively.

Separately, the ZEW Center for European Economic Research said its index of investor and analyst expectations dropped to minus 3.6 in October, the lowest level since November 2012, and down from 6.9 in September. Meanwhile, data showed eurozone industrial production fell 1.8 percent in August, its third decline in four months, for an annual decline of 1.9 percent.

The kiwi advanced to 49.24 British pence from 49.15 pence yesterday after a report showed UK consumer prices rose at a 1.2 percent annual pace in September, missing expectations for a rise of 1.4 percent, and down from 1.5 percent in August. That damped expectations for higher UK interest rates.

The local currency advanced to 89.94 Australian cents from 89.80 cents yesterday ahead of a report on Australian consumer confidence. It slipped to 83.77 yen from 84.68 yen yesterday.